QUESTION: Hi Randell, I am married with a 2-year old kid, and our household income is enough for our needs while letting us save for my daughter’s future. Should I be saving for retirement even though I’m only 30? –Paolo, asked from Facebook

ANSWER: It is a downright YES for that question, Paolo. Unlike investing, which depends on a person’s financial and household situation, retirement is something that must be planned as early in life as possible.

I do not intend to make you feel regret for the past decade, but it is actually ideal to have started retirement planning during your 20s, when you still had no full-time responsibilities and had all your salary to yourself. But you are not alone. The fact is that 9 out of 10 Filipinos do not plan for retirement at all. Some of us enjoy our younger years living from paycheck to paycheck to buy and do things we want, while some might still need to help their parents and siblings especially those coming from large families. These things should not hinder us from setting aside at least a small portion of your income for your seed savings plan.

The sooner you start putting away money for your future, the more time there is for your financial portfolio to grow. Now that you’re 30, the next decade for you is crucial and you must take planning and goal-setting very seriously. If you’re not sure what specific steps to take, here’s a quick plan of action you can follow:

Identify how you want your retirement to be. Retirement is all about living a life of comfort. If you’re planning to retire at 60, you need at least 20 years of preparation, so starting now will make it easier for you in the future. List down the most realistic things you want to have by then, and identify how much it’s going to cost. It is estimated that in order to achieve a life of comfort, you need to generate at least 75 percent of your preretirement income. The key is to picture yourself 20 or 30 years from now and decide that you and your children will have a comfortable life.

Continue saving. It’s good to hear that you have already started saving up for your daughter. Carry on! The next steps for you is to increase the amount you save per month.

Learn about government services on retirement. The agency responsible for social security in the Philippines is the SSS (Social Security System) and GSIS (Government Service Insurance System) for government employees. According to the SSS website, your contributions since you started working will be transformed into a retirement benefit when you retire. A retirement benefit is “a cash benefit either in monthly pension or lump sum paid to a member who can no longer work due to old age.” The pension, is usually, no enough to provide you with a comfortable life during retirement years, and this is a problem experienced by most of our fellow Filipinos.

Consider other savings and investment opportunities. From a short survey on retirement I conducted a few years ago, I learned that most Filipinos’ top 3 retirement instruments are real estate, time deposits and savings accounts. There were few mentions of more sophisticated mediums like life insurance, mutual funds, government bonds and stocks. Take into consideration your income-expenditure plan every year, average inflation rate, and identify which investment opportunities best suit you. The amount you will have at retirement depends largely on the types of investments you commit to.

Consider learning about different types of investments and identify which ones suit you best. Reduce your risk and maximize returns by diversifying your financial portfolio. Take a look at investments like mutual funds, UITF or the stock market as these investments are generally great for capital accumulation in the long term. Here’s a tip — auto-debit arrangements that is used towards a mutual fund or a UITF is an excellent way to build funds that can come handy during retirement.

Be consistent and don’t lose momentum. From the survey I mentioned earlier, one insight came up about Filipinos’ culture of tending for our ‘extended families’. That’s one of the reasons why doing retirement planning is easier said than done. Make sure you do not touch your retirement savings earlier than planned. When you step in to your retirement years, avoid using up your finances quite early.

Start now! Paolo, your 30s is most important decade for retirement planning. At this age, you’re now focusing on providing for your small family. But as the head of the household, your family depends on you to have a long-term plan to support the kinds up until independence and retire without being a burden to them. You are still on time to start, so congratulations!

—-

Attend the biggest investment conference of the year, iCon2015! Speaking at the conference this year will be Marvin Germ, Efren Cruz, Chinkee Tan, Mike Manuel, Jess Uy, Dr. Alvin Ang, Francis Kong and yours truly. It will be held on May 30, 2015 at SMX Mall of Asia. For inquiries, email deniece@brandspeakasia.com

Studies shows that only 1 to 2 out of 10 Filipinos prepare for retirement. Studies also reveals that the few who prepare for retirement, most of them will only exhaust their retirement funds halfway through retirement.

Filipinos are experiencing longer life expectancy but unfortunately, huge costs are needed to live a life of comfort during those years.

Consider this: If you can generate 75% of your pre-retirement income during your retirement years, you will live a life of comfort; if you can only generate 30-50%, you will live a life of struggle. For a 20 year retirement, you need at least 20 years of preparation — if you plan to retire at 60, then you should start preparing at 40.

Attend RETIRE: No Nonsense Retirement Planning Workshop and learn how to properly prepare for your retirement. At the end of the full day workshop, you will be able to prepare a comprehensive retirement plan that is suited for you and a plan that really works. Find out how you can truly live a life of comfort & learn about the proper investments that is best suited for your needs objectively from two of the most recognizable finance advocates of the country.

For inquiries and registration, email info.jcpinc@gmail.com

I wrote an article  about 5 finance things to do before hitting 30 sometime ago and I received a lot of feedback asking for finance advice for a slightly older group. This post is a little too close to home and this post will also speak to me personally to remind of the many things I need to work on as well.

By the time you hit 50, there are few financial behaviors and things which should already be in place.  But do not fret, people say that 50 is the new 30 – whatever that means. 50 is still a relatively young age and there are many things to look forward to in the future. However, 50 is also a good time to do a good review of what you should be doing so that you can enjoy your coming senior years.

Here are some suggestions on finance things we should do and have before 50 – and yes, this list speaks to me as well:

1)   Have a retirement program in place – I know I sound like a broken record (this euphemism can only be understood by people who are the focus of this post, haha!) about retirement planning… but seriously, one should have established a retirement program in place already by this time and building on to that program should accelerate especially during these years. My friend and investment expert Efren Cruz’ advocates the 20/20 retirement rule  — for a 20 year retirement, you should start preparing 20 years ahead. If you plan to retire at 60, you should have started at 40. If you have not yet started and you are nearing 50, start one immediately and prioritize building your retirement program. Speak to a financial planner (preferably a Registered Financial Planner) and look for ways on how to build enough funds to live a comfortable life in retirement. Pooled funds that are equity laced such as mutual funds or UITFs are great ways to build retirement funds. I recommend a comprehensive & quantitative plan for retirement which will help guide you. To learn more on proper retirement planning, you may consider attending RETIRE.

2)   A flourishing career or business – When young people go to me for career or business advice, I often tell them to be adventurous, try new things and not to be afraid of risks too much as they are bound to find something that they will like to do and be successful at it. However, someone who is nearly hitting 50 should have a more stable outlook of what he is doing and what he should be doing in the coming years. When I hit 40 a few years ago, I was placed in a crossroad with regard to my career – I felt that it was the right time for me to make a decision then because 40 is a good time to make changes and adjustments to one’s profession and vocation. There is enough experience to build wisdom at 40 and yet many more years to re-align my future. I am not saying that 50 is too late of an age to make major changes in career & vocation – there are famous people who started flourishing careers and enterprises much later on in their lives. But, doing major changes during this season may be a tad more risky as compared to 10 years earlier. For major career & vocation changes, think and pray hard about it first before jumping into uncharted territory.

3)   Balanced asset portfolio – This is the time to start building on liquidity as many of us may still be totally enamored on just hard assets like property, at the expense of liquidity. Real estate is great for capital build-up and even cash flow but always ensure that a healthy balance of liquid and non-liquid assets are also in place. This may also be a great time to rebalance your portfolio with regard to risk; younger people tend to take in a lot of risk which is fine because they have more time to recover should there be any capital loss — but hitting 50 means you are closer to retirement so it may be a good time to start scaling down your risk a little bit. However, this does not mean that you should stick to low risk instruments only because there are still many more years before you start living off your assets and you can take the next decade or so as an advantage to build more capital. Balance your risk but don’t totally avoid them. Diversification is still important, regardless of age.

4)   Life insurance – Yes, we still need life insurance and maybe even more so. People in this season still have dependents and the risk of untimely death can totally thwart all your hopes and dreams for your family. Unfortunately, premiums begin to rise steeply at this age group and insurance companies will require more proof of insurability. A good gauge of coverage will be about 5x your annual income, or consult a financial planner to help you ascertain your proper insurance needs. Risk management is just as important concern at this season as it was when we were younger. Life insurance will also come in handy as a source of funds to settle estate tax requirements in the future. Consider having health insurance riders to your insurance policies as well.

5)   Investing in memories – Yes, this isn’t totally a finance thing but I do encourage those hitting 50’s not to scale down on time spent with family as others typically do. The children of the late 40’s to 50’s are now getting older and some parents feel that their children want to spend less time with them. I beg to disagree – it is always a good idea to spend quality and quantity time with our children even if they are entering their young adulthood. Our guidance, wisdom, care and love are even more needed at this season of their lives and spending time with them ensures that they will have better chances on living a life of success and happiness. Spending more and more time with your spouse is also a great idea during this period, or any other period in our lives. Remember, our children will eventually leave us but our spouses will be with us to the last breath so let’s invest on those good memories that will last a lifetime.

I’m sure there are more things to take care of but the 5 I mentioned comes top in my mind. 50 is a young age, we have 2 or 3 decades more of life to enjoy and memories to build;  taking care of a few things today will ensure a great and happy future ahead!